CROSS RIVER RAIL PROJECT BUSINESS CASE

CROSS RIVER RAIL PROJECT
BUSINESS CASE
COST BENEFIT ANALYSIS SUMMARY
June 2016

1.1 Introduction
Section 17(1)(a) of the Building Queensland Act 2015 (the Act) requires that Building Queensland
publish a summary, as approved by the Board of Building Queensland, of each Cost Benefit Analysis
(CBA) undertaken as part of the development of any business cases that Building Queensland leads.
The following table provides a summary of the key project details.
PROJECT NAME
Location
Project Owner
Delivery Agency
CROSS RIVER RAIL
Brisbane city rail network
Department of Transport and Main Roads
Cross River Rail Delivery Authority (proposed)
BCR 1.21 (P50) 1.12 (P90)
Estimated Cost of Delivery
NPV
Estimated No. of Jobs Per Annum
Productivity Gains
$5.4b
$996.0m
1,547 FTEs (during construction)/576 FTEs (post-construction)
CBA – Work related benefits $865m
Wider Economic Benefits
$1,209m
1.2 The Cross River Rail Project
In February 2016, the Queensland Government requested that Building Queensland lead the
development of a business case for the Cross River Rail project, in conjunction with the Department
of Transport and Main Roads.
The Cross River Rail project would deliver a new north-south rail connection across the Brisbane
River. It would provide congestion relief on the rail network and rail service access to new locations
near the Brisbane CBD. It would also provide a significant city-building opportunity in the Brisbane
core from Dutton Park to Bowen Hills.
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COST BENEFIT ANALYSIS SUMMARY
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The project would provide a new 10.2 kilometre rail connection and a second inner city rail river
crossing. The major capital elements include:
• twin 5.9 kilometre tunnels, entering a southern portal north of Dutton Park station, travelling
under the Brisbane River and Brisbane CBD before exiting the northern portal south of the
Exhibition station
• four new underground stations at Boggo Road, Woolloongabba, Albert Street and Roma Street
• two upgraded stations at Dutton Park and the Exhibition Showgrounds
• northern surface works consisting of a new track from the portal around the Exhibition Loop
and through to Mayne Yard
• provision for additional stabling at Mayne North Yard
• European Train Control System Level 2 (ETCS L2) installed inside the tunnels
• enabling works (including bi-directional signalling from Dutton Park to Salisbury stations and
southern platform faces).
1.3 The Business Case
The Cross River Rail business case was developed utilising the Building Queensland Detailed Business Case
– Template and Guide, Cost Benefit Analysis Guide and Social Impact Evaluation Guide. The business case
assessed the feasibility of constructing the Cross River Rail project to provide greater railway capacity on
the inner city network, which in turn would facilitate a more extensive rail network and more frequent rail
services.
Key benefits identified in the business case include:
• an additional rail crossing under the Brisbane River near the Brisbane CBD
• more railway capacity to significantly improve and increase rail services across the SEQ network
• less-congested roadways
• city-building opportunities at Woolloongabba, the Brisbane CBD and Bowen Hills.
The Queensland Government approved the business case in June 2016.
A detailed economic appraisal was undertaken for the project as part of the business case. It was
developed to inform the type and magnitude of project beneficiaries and costs.
1.4 CBA Methodology
Section 14(3) of the Act requires the CBA to be prepared using a method, approved by Building Queensland
that enables any infrastructure proposal to be compared.
A detailed CBA was undertaken as part of the business case to test the project’s economic viability. CBA is
universally applied to investment decision making for infrastructure in Australia. Its principles are accepted
as the most appropriate tool to measure the direct contribution to economic and social objectives. It
measures the direct impacts of public sector investment relative to whole-of-life costs.
In this regard, CBA provides a common and consistent way of evaluating investment cases where the tools
are applied uniformly across projects. CBA seeks to demonstrate the efficiency and productivity gains to be
generated from investing in infrastructure by quantifying the net impacts to society at large.
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COST BENEFIT ANALYSIS SUMMARY
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The CBA framework used to develop the economic appraisal for the Cross River Rail project follows
guidance set out and contained within industry accepted economic appraisal guidelines, adapted to project
specific parameters. These guidelines include:
• The National Guidelines for Transport System Management (NGTSM), 2015. These guidelines are
currently being updated from earlier revisions in 2006. Guidance contained within the NGTSM (2015)
has been utilised as the preferred source of contemporary economic values.
• Cost Benefit Analysis Guide: Supporting Business Case Development, Building Queensland, April 2016.
• Infrastructure Australia, 2013. Reform and Investment Framework. While these guidelines do not
provide specific monetary unit values and parameters for use in the economic appraisal, the economic
appraisal has been developed in accordance with the principles identified in the framework (including,
for example, the discount rate and sensitivity analysis).
• Austroads, 2012. Guide to Project Evaluation: Parts 1-8. The Austroads’ suite of evaluation guidelines
sets the foundation for transport appraisal in Australia. Principles adopted from these guidelines have
been used where they are not covered in the NGTSM.
The CBA valued the economic benefit of increased rail network capacity and reliability, compared to the
capital, operational and rollingstock costs.
1.5 Assumptions
The key assumptions used in the Cost Benefit Analysis include:
CROSS RIVER RAIL ECONOMIC APPRAISAL ASSUMPTIONS
PARAMETER ASSUMPTION SOURCE
Discount rate
A central rate of 7% (real).
Sensitivities provided at 4% and 10 %
Infrastructure Australia
Price year December 2015 Adopted from cost estimates
developed by the Cross River Rail
Project Cost and Risk Advisor
Evaluation period 30 years of benefits post construction NGTSM (2015)
Indexation
Unit costs and parameter values indexed from
the price year by the Consumer Price Index
(including sub-categories as appropriate) and
Producer Price Index.
Unit costs Adopted from NGTSM and related sources NGTSM (2015)
Australian Bureau of Statistics
(2016)
Transport user benefits are calculated in accordance with the national appraisal guidelines referred to in
Section 1.4 above.
1.6 CBA Results
The CBA demonstrated a positive economic return in excess of the project’s whole of life costs, with the
Cross River Rail project returning a Benefit Cost Ratio (BCR) of 1.21. The Net Present Value (NPV) of the
Cross River Rail project is $996 million.
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COST BENEFIT ANALYSIS SUMMARY
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The CBA establishes that the Cross River Rail project delivers benefits to public transport, road users and
the wider community.
The relative proportions of the elements of project benefits and costs are illustrated in the following charts.
Cross River Rail Project Costs
Cross River Rail Project Benefits
Rollingstock
6%
Other
benefits
13%
Operating
44%
Capital
50%
Vehicle
operating
costs
22%
Road travel
time savings
40%
Public
transport
users
25%
1.7 Gross State Product and Wider Economic Benefits
Cross River Rail is expected to contribute $3.28 billion (present value, 7%) to the Gross State Product over
the evaluation period. The project is also expected to support 1,547 direct and indirect full-time
equivalents (FTEs) during construction and 576 FTEs during operations, per annum.
An estimated $1,209 million (present value) of wider economic benefits are attributable to the Cross River
Rail project.
1.8 Productivity Gains
Consistent with the requirements of s14(2) of the Act, the business case identifies the productivity gains
that are anticipated from the project.
Well-targeted transport investment results in significant, long term productivity benefits for local, regional
and national economies. Productivity is the efficiency of transforming inputs (including capital and labour)
into outputs (goods and services).
Reduced transport costs result in a reduction in costs of doing business, lowering the costs of production
and increasing the efficiency of business interactions.
Productivity gains for the Cross River Rail project have been derived by identifying work related benefits as
a sub-set of the benefits identified in the CBA in the order of $865 million (present value) and wider
economic benefits of $1,209 million for a total productivity gain of $2,074 million.